Asia FX Muted as Hawkish Fedspeak Curbs Dollar Losses

Most Asian currencies moved little on Wednesday as hawkish comments from Federal Reserve officials helped stem recent losses in the dollar, while the Japanese yen hovered around 32-year lows as traders looked past threats of government intervention.

The fell as far as 149.29, its weakest level against the dollar since 1990, as a widening gap between local and U.S. interest rates weighed.

Short sellers of the currency largely ignored warnings from Japanese authorities that they would intervene a second time in currency markets to support the currency. Japanese intervention in September had only briefly stalled the yen’s losses, which was then trading around 145 to the dollar.

Other Asian currencies moved little. They slipped 0.2%, while they hovered near record lows, at 82.3 to the dollar.

Asia FX Muted as Hawkish Fedspeak Curbs Dollar Losses

They bucked the trend, rising 0.4% as traders bet the government would intervene in currency markets to fish the currency from 14-year lows.

The was largely flat on Wednesday but appeared to have curbed recent losses after hawkish comments from two Federal Reserve officials. said the central bank could push its benchmark rate to higher than 4.75% by mid-2023 if inflation remains stubbornly high. His comments came just a few days after data showed U.S. inflation saw little signs of slowing in September, sticking to near.

Atlanta Fed President Raphael Bostic also stated that the central bank’s key focus should lie in controlling runaway inflation.

Their comments helped curb a two-day losing streak in the dollar index. The index traded sideways around 112 on Wednesday, as did. also edged higher, sticking close to 14-year highs.

Rising U.S. interest rates were the biggest weight on Asian currencies this year, as the gap between risky and low-risk debt narrowed. The trend is expected to persist in the coming months, given that the Federal Reserve has made no indication that it plans to ease up on interest rate hikes.

Markets are pricing in a central bank will raise rates by 75 basis points in November, its fourth such hike this year.

Inflation Definition

In terms of technical definition, inflation is the rate of growth in prices over a certain amount of time. In the context of a conversation, however, the word “inflation” most commonly is applied to the increase rate of the Consumer Price Index for All Urban Consumers which is usually called”the Consumer Price Index or simply the CPI.

However, measures of inflation do not require the CPI. The federal agency that tracks the CPI The Bureau of Labor Statistics also monitors the Producer Price Index or PPI. The PPI is a measure of the rate of rising in prices that are achieved by domestic producers. The CPI is a measure of the rate of growth in the cost of goods and services paid by consumers in the country.

Inflation is a measure that can be used without an index, too. It can be measured by the market or a specific commodity. Some companies may describe the increase in their prices as inflation “wage inflation”, in particular, it is a popular expression that refers to the increase in labor costs.

On the technical level, the term “inflation” refers to any increase in any price. However, in political or economic analysis the term “inflation” is usually referring to the change rate within the CPI.

Inflation Rate Formula

The formula used to calculate the rate of inflation is the same as any other percentage-based comparison. The rate of inflation is the sum of the change in prices multiplied by the initial base.

In the case of annual inflation as an example the formula could look as follows:

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